Promotional incentives prove successful at Krispy Kreme

by Eric Schroeder
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Pumpkin donuts and other limited-time offers helped lift sales for Krispy Kreme during the third quarter.

WINSTON-SALEM, N.C. — Effective limited-time offerings, including pumpkin-themed Flavors of Fall and two marshmallow-inspired cream-filled donuts inspired by the “Ghostbusters” movie, contributed to an increase in third-quarter earnings at Krispy Kreme Doughnuts, Inc.

Net income in the quarter ended Nov. 2 was $8,106,000, equal to 12c per share on the common stock, up 20% from $6,780,000, or 10c per share, in the same period a year ago. Revenues rose 8% to $122,871,000 from $114,231,000.

“Our deliberate and strategic use of promotional incentives and a higher level of marketing spend proved successful in growing our top line,” Tony Thompson, president and chief executive officer, said in a Dec. 9 conference call with analysts. “Now that we have regained traffic momentum, in the fourth quarter, we are looking to balance top-line growth with improved shop operating margins.”

In the wholesale channel, sales increased nearly 7% to $40,187,000 from $37,680,000. Mr. Thompson said Krispy Kreme’s long-term goal is to increase the percentage of sales comprised of longer shelf life products.

“We took another step in that direction when we recently introduced Krispy Kreme apple Danishes and raspberry Danishes,” he said. “These products are individually packaged and are a great pairing with Krispy Kreme coffee that can be brewed at home or work.”

Speaking of coffee, Mr. Thompson said the company is prioritizing leveraging the Krispy Kreme brand into enhancing its coffee and specialty drink platforms so that beverages play a larger role in sales mix.

“While we are determined to increase the frequency of donut purchases, there is also a significant opportunity to increase the beverage attachment rate for consumers visiting our shops,” he said. “Our research suggests that Krispy Kreme coffee and other beverages need to have a higher top-of-mind consumer awareness, so we are taking steps to achieve that.”

To help drive beverage opportunities both inside and outside Krispy Kreme shops, Mr. Thompson said the company has hired Amy Harp as vice-president of global beverage strategy. Ms. Harp most recently was global head of digital brand at illycaffe S.p.A., a global coffee company. Earlier in her career she spent time at PepsiCo, Inc. as senior manager of new business marketing and new products.

Mr. Thompson, who took the helm at Krispy Kreme on June 1, said the biggest surprise in his first six months on the job has been the fact the company does as much or more business after 2 p.m. as it does before 2 p.m.

“So if you are thinking of us mainly in the context of battling for consumers at breakfast, you should think more broadly,” he said. “Consumer demand for Krispy Kreme is not limited to any specific day part, and I believe that is a big advantage, in a competitive environment that is heavily focused on breakfast.”
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